Slide 1

Prof. Sonia Feliciano, CPA Workshop to: Accounting Professors UPR Bayamn March 27, 2009 FASB Accounting Standards Codification 1

Slide 2

OBJECTIVES To obtain a good understanding of the FASB Standards Codification System To encourage the use of the Codification Research System for research 2

Slide 3

House of GAAP AICPA Accounting Interpretations FASB Implementation Guides Recognized Industry Practices FASB Emerging Issues Task Force AICPA AcSEC Practice Bulletins FASB Technical Bulletins Category D (Least Authoritative) AICPA Industry Audit and Accounting Guides AICPA Statements of Position Category C FASB Statements, Interpretations, and Staff Positions APB Opinions APB Opinions CAP Accounting Research Bulletins Category B Category A (Most Authoritative) Category A (Most Authoritative) 3

Slide 4

FASBFASB Preparers (e.g., FEI) Financial Community Financial Community Government (SEC, IRS, other agencies) Industry Associations Industry Associations Business Entities CPAs and Accounting Firms CPAs and Accounting Firms AICPA (AcSEC) Academicians Investing Public Accounting standards, interpretations, and bulletins Standard Setting LO 8 Describe the impact of user groups on the standard-setting process. Illustration 1-5 Illustration 1-5 User Groups that Influence Accounting Standards 4

Slide 5

Why Codify U.S. GAAP? Constituent concern that U.S. GAAP is overly confusing and difficult to research Multiple types of standards, multiple standard setters, multiple indexing schemes, and different levels of authority make it difficult to retrieve all relevant U.S. GAAP

Slide 6

FASB Accounting Standards Codification Four-year project involving over 200 people from multiple entities Significantly different from the structure of existing accounting standards A major restructuring of accounting and reporting standards: a reconfiguration of current GAAP 6

Slide 7

The FASBs intent in creating the Codification is that the content accurately represent existing standards Authors were instructed to change as few words as possible when authoring their topics As of July 1, 2009 the FASB expects to formally approve the Codification as the single source of authoritative US accounting and reporting standards 7

Slide 8

FASB Accounting StandardsCodification Primary Goal Simplify user access to all authoritative US generally accepted accounting principles (GAAP) by providing all the authoritative literature in one place 8

Slide 9

FASB expects that the codification: Will help mitigate the risk of noncompliance with accounting standards Provide real-time updates as standards change and, Reduce the amount of time and effort required to research accounting issues. 9

Slide 10

Reassembled the pieces into approximately 90 topics Contents in each topic are further organized first by subtopic, then section and finally paragraph. 10

Slide 11

The paragraph level is the only level that contains substantive content; all higher levels in the topical structure exist merely to organize the paragraph level content The SEC guidance in the codification will be provided strictly on a convenience basis, and FASB has made extensive disclaimer regarding reliance on it. 11

Slide 12

12

Slide 13

Before Codification is authoritative FASB strongly encourages use of the Codification Research System for research Until Codification is authorithative, the web-based online research tool is freely available to users Users must keep in mind that the Codification has not been approved as authoritative 13

Slide 14

Codification structure, content and styles Presentation Topic codes 205-299 only to presentation matters. Financial Statements Accounts Topic codes 305 -700 organizes topics in a financial statement order including Assets, Liabilities Equity, Revenue, and Expenses. Topics include Receivables, Revenue Recognition, Inventory, and so forth. 14

Slide 15

Broad Transactions Topic Codes 805 899 relate to multiple financial statement accounts and are generally transaction- oriented. Topics include Business Combinations, Derivatives, Nonmonetary transactions, an so forth. Industries Topic Codes 905-999 relate to accounting that is unique to an industry or type of activity. Topics include Airlines, Software, Real State, and so forth. 15

Slide 16

Description of the Sections XXX-YY-ZZ XXX Topic YY Subtopic ZZ - Section 16

Slide 17

Sections of each Subtopic XXX-YY-00 Status XXX-YY-05 Overview and Background XXX-YY-10 Objectives XXX-YY-15 Scope and Scope Exceptions XXX-YY-20 Topical Definitions-Glossary XXX-YY-25 Recognition XXX-YY-30 Initial Measurement XXX-YY-35 Subsequent Measurement 17

Slide 18

XXX-YY-40 Derecognition XXX-YY-45 Other Presentation Matters XXX-YY-50 Disclosure XXX-YY-55 Implementation Guidance and illustrations XXX-YY-60 Relationship XXX-YY-65 Transition and Other Effective Date information XXX-YY-70 Links to Grandfathered Material XXX-YY-75 XBRL Definitions 18

Slide 19

Description of the Sections XXX-YY-00 - Status : includes references to the post- Codification standards that affect the Subtopic XXX-YY-05 general overview and background regarding the subtopic XXX-YY10 states the high-level objectives of the Subtopic, but does not discuss the main principles of the Subtopic 19

Slide 20

XXX-YY-15 Scope and Scope Exceptions: outlines the items( for ex. entities, transactions, instruments or events) to which the guidance in the Subtopic does or does not apply. It does not contain actual accounting or reporting guidance (for ex. subsequent measurement) XXX-YY-20 Glossary: all the glossary terms used in the Subtopic 20

Slide 21

XXX-YY-25 Recognition: criteria, timing, and location(within the financial statements) for recognizing a particular item. XXX-YY-30 - Initial Measurement: criteria and amounts used to measure a paricular item at date of recognition. 21

Slide 22

XXX-YY-35 Subsequent Measurement: criteria and amounts used to measure a particular asset, liability, or equity item subsequent to the date of recognition (for ex. impairment, fair value changes, depreciation, amortization, and similar items). 22

Slide 23

XXX-YY-40 - Derecognition: criteria, basis, and timing to be used when derecognizing a particular asset, liability or equity item for purposes of determining gain or loss if any (Ex. Sale, other disposal or loss of assets; and settlement and cancellation of liabilities) XXX-YY-45 - Presentation matters: related to the topic (Ex. Specific balance sheet classification, specific cash flow requirements, specific effect on EPS) 23

Slide 24

XXX-YY-50 Disclosure: specific disclosure requirements for a subtopic. Excludes general disclosure requirements XXX-YY-55 Implementation guidance and illustrations: provides guidance relating to the standards in simplified and generalized situations. XXX-YY-60- Relationships: includes references to other subtopics that may contain guidance related to the subtopic XXX-YY-65 Transition and open effective date information 24

Slide 25

XXX-YY-70 - Links to Grandfathered material: the guidance will be archieved within a database that contain all superseded and grandfathered literature ( Ex. APB 16 Business Combinations: FASB 141 eliminated the pooling of interest method for all business combination initiated after June 30, 2001. Entities with pooling transactions prior to June 30, 2001 shall refer to APB 16 ). XXX-YY-75 XBRL Definitions SEC Sections SEC content is included for reference to improve the usefulness of the Codification for public companies 25

Slide 26

How to use the Codification: Go to: http://asc.fasb.org View tutorial: click navigation and content View help pages: click navigating the codification Navigate the codification using a selected topic Continue using the ASC for the academic process 26

Slide 27

SELECTED TOPIC Go to PRESENTATION (205-299) CLICK Accounting Changes and Error Corrections Click expand, overall, join all sections, overall 27

Slide 28

SELECTED TOPIC: REVENUE View expanded table of content Select a section or Click overall Click join all sections Overall Navigate thought a selected topic 28

Slide 29

Summary & Questions

Slide 30

Thank you for participating

Slide 31

References: Ford Caroline O., C. William Thomas, Test Driving the Codification, Journal of Accountancy, December 2008, Vol. 206, pg. 62 Heffes Ellen M., Conceptual Framework, Revenue Recognition Top FASAC Priority List, Financial Executive, December 2006, Vol. 22, pg.14 Pounder Bruce, Framing the Future, Journal of Accountancy, May 2008, Vol.205,pg.40 Williams Kathy, FASB Wants Feedback on Codification, Strategic Finance, February 2008, Vol. 89, pg.21 31